Universal Basic Income: cometh the hour, cometh the policy?

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The idea of a basic income equally paid out to all citizens of a polity is not a new one. It is proposed in Thomas More’s socio-political satire Utopia and the free provision of capital by the state — in this instance in the form of grain — dates at least as far back as the Cura Annonae in Ancient Rome. In the midst of the economic catastrophe that Covid-19 is inflicting, this centuries-old idea is enjoying something of a renaissance.

The Spanish government, led by the Socialist Party and supported by the more radical left Podemos Party, is actually in the process of implementing a basic income. Spain’s Deputy Prime Minister Pablo Iglesias, who hails from the radical part of the coalition, has suggested that the policy shall remain once the current crisis has ended.

In the UK, recent Labour leadership hopeful Rebecca Long-Bailey has outlined her support for a Universal Basic Income during the pandemic, and the newly-appointed Shadow Work and Pensions Secretary Jonathan Reynolds is a long-standing and vocal supporter.

In March 170 mostly Labour MPs and peers called for UBI’s introduction in an open letter to the Chancellor Rishi Sunak. On the 22nd April this went further as MPs from all the opposition parties — including John McDonnell, Ed Davey and Ian Blackford — signed a letter calling for a “recovery Universal Basic Income”.

Support however is not drawn solely from left-wing and centre-left governments, parliamentarians and academics. Basic income, in the form of a negative income tax, was strongly advocated by Milton Friedman and Friedrich Hayek, the Godfathers of the monetarist and neoliberal reforms of the 1980s, andtheir support for basic income has endured on the libertarian right.

Prior to the pandemic the policy had however been most vociferously championed by Silicon Valley. The policy formed the backbone of tech entrepreneur Andrew Yang’s unsuccessful presidential campaign, and it has garnered public support from two of the industry’s biggest titans, Mark Zuckerberg and Elon Musk. Even Pope Francis in the wake of the pandemic has weighed in on the policy calling (on Easter Sunday no less) for a basic income to “ensure and concretely achieve the ideal, at once so human and so Christian, of no worker without rights”.

So how would UBI actually work and why is it proving so popular, across a wide spectrum, amidst this pandemic?

UBI is actually in many ways incredibly simple, a characteristic for which the policy has been lauded by supporters. Under UBI a sum of money is granted universally by the state that isn’t taxable and comes with no strings attached. It is unconditional, automatic, individual and non-withdrawable; it is a right of one’s citizenship. It is proving popular at present due to to welfare systems’ inability to adjust to the acute rise in unemployment that countries have endured.

In the UK, The Department for Work and Pensions states that 950,000 claims for Universal Credit were made in the two weeks following the 16 March — a time period in which the department would normally receive around 100,000 claims. This increased demand, added to Universal Credit’s six-week wait is wreaking havoc not only on an already pressured system, but also on a large number of people’s economic security. With the OBR predicting that unemployment will soar to over 10% in the coming months, the scale of this insecurity is only going to worsen.

Support for UBI thus largely centres on the lack of bureaucracy associated with it — which is in marked contrast to existing welfare systems — and on the security it can provide during a crisis like this. Supporters however do not feel that this measure is only useful during a crisis.

They argue that the nature of work is changing, with more people being self-employed (5 million in the UK) and engaging in insecure work in the gig economy or under zero-hours contracts. They also posit that as automation replaces many of the jobs currently performed by individuals, there will need to be immediate support for them so they are able to retrain and transition in the new economy. They argue that current welfare systems are a relic of an industrial society where the job for life existed — a society that is long gone — and that UBI is much more befitting the modern economy where people frequently change jobs and where work is more insecure.

There is however significant opposition to UBI, which mostly focuses on the cost of rolling it out, and the perceived waste associated with paying the money to people who don’t need it. Daniel Susskind, an economist at Oxford University, has estimated that a £1000 stipend paid to all over-18s during the crisis would cost the treasury £66bn per month.

Critics suggest that this excessive sum is largely due to handing the money to millions of people who don’t require it. Backers of UBI suggest however that the policy needs to be universal in order for it not to be bureaucratic, and its universality is essential to the money getting to the people who do need it. They suggest that the benefits brought to those who don’t need the money can be easily offset by tax increases on those in higher income bands.

The idea of every citizen receiving a monthly dividend from the state, regardless of their financial circumstances, may nevertheless still seem somewhat absurd. Having said this, it is often the case that economic policy that is initially discounted, once implemented, proves incredibly popular and long-lasting.

Income tax was initially introduced in this country as a crisis measure to fund the Napoleonic Wars and was in no way expected to be continued during peacetime. Similarly the incredible ideological divide that existed over the introduction of the National Minimum Wage has been forgotten. Both policies, whilst controversial when being introduced, are now seen as essential to ensuring not only the efficient handling of public finances, but also of ensuring fairness in the economy.

Ultimately as the pandemic rages on, and as unemployment and economic insecurity continues to rise in the days and months that follow, supporters of UBI will become even more vocal and will — in all likelihood — build an even greater consensus. Despite being an ancient idea, it would not be wise to bet against basic income being the future.